Overview of Natural Gas Sector

1.1 A brief outline of your jurisdiction’s natural gas sector, including a general description of: natural gas reserves; natural gas production including the extent to which production is associated or non-associated natural gas; import and export of natural gas, including liquefied natural gas (LNG) liquefaction and export facilities, and/or receiving and re-gasification facilities (“LNG facilities”); natural gas pipeline transportation and distribution/transmission network; natural gas storage; and commodity sales and trading.

Natural gas reserves and production

Denmark is one of the leading oil and gas producers in the EU. Production commenced from the North Sea fields in 1972 and gradually increased until a peak in 2004, following which, production has been on the decline. Today there are 19 producing fields and 15 of them are operated by Maersk Oil, three fields are operated by DONG, and one field is operated by Hess. The largest gas producing fields are Tyra, Dan, Halfdan and Harald, which are operated by Maersk, and the South Arne field which is operated by Hess. The natural gas reserves were in 2012 calculated to a volume of 55 milliard (mia.) m3. In 2017 the DONG-operated Hejre field is expected to begin production. The field’s gas processing capacity is estimated to be 76 million scf/day (standard cubic feet of gas per day) and the expected lifetime production is 170 million barrels of oil equivalent.

Transportation, storage, and transmission system

The gas is transported from the fields in the North Sea to the processing plant in Nybro, Jutland. As of late 2015, DONG owns and operates all upstream pipelines. In connection with the planned public listing of DONG by 2018 at the latest, the upstream pipelines will be taken over by Energinet.dk, a state entity, on a commercial basis. The transmission system onshore is already operated by Energinet.dk. There are two natural gas storage facilities on land, one in Lille Torup, Jutland, and one in Stenlille, Zealand, both today owned and operated by Energinet.dk. These two storage facilities are used for seasonal and load balancing and emergency supply.

Distribution

Today, DONG is the distributer of natural gas in South Jutland, and South and West Zealand; HMN Naturgas distributes for Central and North Jutland and the Capital Region; and Naturgas Fyn covers distribution on Funen.

Import and export

Denmark is self-sufficient in natural gas, but there is an exchange of gas with Germany, Norway, Sweden and the Netherlands. In 2014, the total production of natural gas was 173 petajoules (PJ) while consumption was 118 PJ. In 2013, Denmark imported approximately 0.9 mia. m3 from Germany and Norway, and exported approximately 2.1 mia. m3 to Sweden, Germany and the Netherlands. For information regarding LNG facilities, please see the answers under questions 9.1 to 9.4.

Denmark’s total consumption of energy was, in 2014, 730 PJ per year, and approximately 17% thereof is covered by natural gas, i.e. 120 PJ. Over the coming years a substantial part of natural gas consumption could be replaced by non-fossil fuel gases such as biogas.

Denmark is self-sufficient in natural gas, but there is an exchange of gas with Germany, Norway, Sweden and the Netherlands. Please see question 1.1 for further details on the volumes of import/export.

1.4 To what extent is jurisdiction’s natural gas production exported (pipeline or LNG)?

Denmark is self-sufficient in natural gas, but there is an exchange of gas with Germany, Norway, Sweden and the Netherlands. Please see question 1.1 for further details on the import/export volumes. It is expected that Denmark will remain a net exporter of natural gas at least until 2025.

Overview of Oil Sector

Denmark is one the EU’s leading oil producers and the only net exporter of oil in the EU. As described under question 1.1, Danish oil reserves and production are located in the Danish sector of the North Sea. There are 19 producing fields and 15 of them are operated by Maersk Oil, three fields are operated by DONG, and one field is operated by Hess. The five largest oil producing fields are Halfdan, Dan, Gorm, and Skjold, owned by the DUC consortium (Maersk, Shell and Chevron) and operated by Maersk, and the South Arne field owned primarily by Hess and operated by Hess. These five fields alone produce approximately 80% of the total oil production. The oil reserves were in 2012 calculated at a volume of 128 million (mio.) m³.

Regulation

The Danish upstream oil sector – as well as natural gas exploration and production – is governed by the Danish Subsoil Act (Act No. 960 of 13th September 2011 as amended by Act No. 535 of 29 April 2015). Under the Act, the state grants a licence to the licensee for investigations, exploration and production. The licence is regulated by the state under the Subsoil Act, which means that all substantial activities in all phases of investigation, exploration and production require a separate approval from the government.

Licences are awarded through licensing rounds, via open door procedures, adjacent area procedures or mini-rounds. Since 1984 seven licensing rounds have been held. The 6th licensing round in 2005 resulted in 14 licences being issued in May 2006. The licences in the 7th licensing round, which closed in October 2014, are expected to be issued before the end of 2015, and the Danish Energy Agency (DEA) plans to carry out licensing rounds every second year from 2016 (or more likely 2017) onwards. Licences awarded are exclusive licences for both oil and natural gas exploration and production. The Subsoil Act is supplemented by Model Licences for both tendering rounds and open door procedures as well as model Joint Operating Agreements (JOAs).

2.2 To what extent are jurisdiction’s energy requirements met using oil?

Denmark’s total consumption of energy was in 2014 730 PJ per year, and 38% thereof is covered by oil, i.e. approximately 275 PJ.

2.3 To what extent are jurisdiction’s oil requirements met through domestic oil production?

Denmark has, since 1993, been self-sufficient in oil. In 2014 the self-sufficiency percentage was 125% compared to 134% in 2013. Danish oil self-sufficiency has been decreasing since 2004. Please also see the answer to question 2.4 below.

2.4 To what extent is jurisdiction’s oil production exported?

As mentioned in question 2.3 above, Denmark has, since 1993, been self-sufficient in oil. In 2014 the self-sufficiency percentage was 125% compared to 134% in 2013. Danish oil self-sufficiency has been decreasing since 2004, however as of 2014 Denmark remains the single net exporter of oil in the EU, with exports of 13.7 mill. barrels of oil equivalent (boe) in 2013. It is expected that Denmark will remain a net exporter of oil at least until 2021.

Development of Oil and Natural Gas

3.1 Outline broadly the legal/statutory and organisational framework for the exploration and production (“development”) of oil and natural gas reserves including: principal legislation; in whom the State’s mineral rights to oil and natural gas are vested; Government authority or authorities responsible for the regulation of oil and natural gas development; and current major initiatives or policies of the Government (if any) in relation to oil and natural gas development.

The Subsoil Act is a framework act that regulates the general licensing conditions. It governs preliminary investigations, exploration and production of resources from the Danish subsoil with a focus on hydrocarbons.

The purposes of the Danish Subsoil Act is to ensure appropriate use and exploitation of the Danish subsoil, in a manner that is safe and preventative regarding waste, and furthermore to ensure that the accumulation contributes to the Danish energy supply in an expedient matter.

The act is a framework act, which means that licensees need a new licence for each phase of the process. A licence is granted on the basis of a Model Licence which contains detailed terms and conditions and is an integrated part of licensing rounds. The Danish Energy Agency (DEA) is the responsible authority for granting licences.

Other principal legislation includes the Offshore Safety Act and the Marine Environment Act.

3.2 How are the State’s mineral rights to develop oil and natural gas reserves transferred to investors or companies (“participants”) (e.g. licence, concession, service contract, contractual rights under Production Sharing Agreement?) and what is the legal status of those rights or interests under domestic law?

In accordance with the Danish Subsoil Act, all hydrocarbons in the Danish subsoil are the property of the state. Through licences, for example the 7th licensing round, licences are granted for exploration and production. The legal status of a licence is in Denmark considered private property and is thereby governed by and protected under Danish law.

3.3 If different authorisations are issued in respect of different stages of development (e.g., exploration appraisal or production arrangements), please specify those authorisations and briefly summarise the most important (standard) terms (such as term/duration, scope of rights, expenditure obligations).

The Danish Subsoil Act contains several provisions regarding the different stages of oil and gas development.

A licence for preliminary investigations is granted for three years. Such licence is not an exclusive right and it does not prevent the DEA from granting others a similar right. If a company is granted a licence for preliminary investigations, the company is not entitled to the exclusive and sole right for the following licences of exploration for and production of the crude material. Every stage requires a separate licence.

A licence for exploration and production is a sole and exclusive right, which is granted by the DEA for an exploration period of six years, with an opportunity for extension for exploration of two years at a time, though the full exploration period may not exceed 10 years. The production part of the licence will be for a duration of 30 years, with a maximum of up to 50 years, which may be extended under special circumstances. The exclusive right has two aspects. A positive aspect for the licensee to exercise such an activity (the licence) vis-à-vis the state, and a negative aspect in the fact that the licensee needs several other permits than the mere exclusive right in order to carry out development and production of crude materials.

A Model Licence supplements the Subsoil Act and licences for exploration and production of hydrocarbons will be granted on the basis of the Model Licence.

In order for an applicant to be granted a licence, the Subsoil Act lays down requirements for the applicants. An applicant shall have the necessary technical expertise and the financial resources to be granted a licence. Changes to the Subsoil Act in 2015 have in a new chapter 7a implemented new requirements for technical and financial capacity to be assessed and documented at each stage (e.g. seismic, drilling, development, production) and for licensees to provide adequate financial security in the form of insurance or financial guarantees.

3.4 To what extent, if any, does the State have an ownership interest, or seek to participate, in the development of oil and natural gas reserves (whether as a matter of law or policy)?

The Danish state’s rights are a matter of law. The legislation granting such rights is primarily the Subsoil Act, the Natural Gas Act and the Act on the Danish North Sea Fund, as well as the individual licences. The state participates in licences for exploration and production of hydrocarbons in Denmark through the Danish North Sea Fund (Nordsøfonden), which is owned 100% by the Danish government and designated a special public (state-owned) company. Since 2005, Nordsøfonden has been responsible for a 20% non-operating participation in all licences granted and furthermore Nordsøfonden have since 2012 been responsible for 20% state participation in Denmark’s largest producer, the DUC consortium, as a non-operating partner. Nordsøfonden has been, since October 2014, organised as a special public (state-owned) enterprise with its own board of directors. It was previously placed as an entity under the Ministry of Business and Growth.

3.5 How does the State derive value from oil and natural gas development (e.g. royalty, share of production, taxes)?

The Danish Ministry of Taxation, the Central Customs and the Tax Administration are the responsible bodies for corporate income tax and hydrocarbon tax. The revenue is based on reporting by the licensee and supervision from the DEA concerning the metering of the volumes of oil and gas production.

Hydrocarbon extraction is subject to corporate income taxation. The level of taxation is 25% for oil and gas production income. Further hydrocarbon tax is applicable, at a rate of 52%. When calculating the hydrocarbon tax, the corporate tax and a 5% uplift for investments in a period of six years can be deducted.

3.6 Are there any restrictions on the export of production?

Today there are no such restrictions. In regard to the Act on Notification and Sale Duty concerning Hydrocarbons (Act no. 165 of 7th May 1975) the Minister for Climate, Energy and Building could in principle decide further details regarding the export of production. These rights have never been exercised but formally remain in place.

3.7 Are there any currency exchange restrictions, or restrictions on the transfer of funds derived from production out of the jurisdiction?

There are no such restrictions other than those applicable to any member of the European Union.

3.8 What restrictions (if any) apply to the transfer or disposal of oil and natural gas development rights or interests?

Under Section 29 of the Danish Subsoil Act, any direct or indirect transfer of the licence requires the prior approval of the DEA. The reason is that the DEA must on behalf of the Danish government assure itself that the new licence holder can uphold the commitments regarding the licence both from a financial and a technical perspective.

3.9 Are participants obliged to provide any security or guarantees in relation to oil and natural gas development?

As in previous rounds, under sections 30-32 in the Model Licence for the 7th licensing round, the participants must provide the necessary insurances and a financial security (parent company guarantee) that are commensurate with obligations and potential liabilities to be undertaken. Specific insurance guidelines apply in particular regarding third-party liability insurances and control-of-well insurances. As from July 2015 these requirements have been strengthened as licensees will, in accordance with chapter 7a of the Subsoil Act, now have to demonstrate technical and financial capacity at each stage of operations, including development. It remains to be seen how in practice the Danish Energy Agency will administer these rules.

3.10 Can rights to develop oil and natural gas reserves granted to a participant be pledged for security, or booked for accounting purposes under domestic law?

Licences granted under the Subsoil Act cannot be subject to prosecution and can therefore not be pledged for security according to section 29 (1) and (2) of the Subsoil Act. A licence to develop hydrocarbons can be booked for accounting purposes provided the generally accepted accounting principles are adhered to.

3.11 In addition to those rights/authorisations required to explore for and produce oil and natural gas, what other principal Government authorisations are required to develop oil and natural gas reserves (e.g. environmental, occupational health and safety) and from whom are these authorisations to be obtained?

A licence will not be sufficient to carry out work in developing hydrocarbons. In the process it will be necessary to obtain several permissions for the operative work in connection with the licences.

Offshore, it will be necessary to obtain permissions for every significant step of the development in accordance with the Subsoil Act. Furthermore, it will be necessary to have permissions in relation to drilling, environment matters, health, safety and security, residence permits for the workers, flight permits, etc. Some of the relevant authorities are the DEA, the Danish Maritime Authority, the Environmental Protection Agency and from 2015 also the Danish Working Environment Authority in matters of health and safety.

Onshore, it will be necessary to obtain construction permissions for processing plants, transportation, transmissions, etc. The Danish municipalities are the main authority for construction and other onshore operational permits outside of the DEA’s domains. Onshore, subsoil issues will generally be governed by the DEA, and above-surface issues by the local municipality. Health and safety matters are handled by the Danish Working Environment Authority.

3.12 Is there any legislation or framework relating to the abandonment or decommissioning of physical structures used in oil and natural gas development? If so, what are the principal features/requirements of the legislation?

Section 33 of the Subsoil Act contains a provision in relation to decommissioning physical structures on- and offshore. In the event that the state does not wish to take over the facilities, the licensee must remove the facilities in accordance with the details contained in the decision on decommissioning.

Under section 37(6) of the Model Licence for the 7th licensing round, which has also been a requirement in previous rounds, a closure plan must be provided in due time prior to the anticipated closure of the facility.

With effect from July 2015 a so-called subsidiary or secondary liability for licensees have been implemented in the Subsoil Act, i.e. a previous licensee will remain liable for decommissioning costs even if ownership has been transferred to a new licensee.

3.13 Is there any legislation or framework relating to gas storage? If so, what are the principle features/requirements of the legislation?

Chapters 6 and 6a in the Subsoil Act set forth rules on gas storage and CO2 storage, respectively. The rules are principally similar to those applicable to pre-investigations, exploration and production of oil and gas. All activities for storage require the prior approval of the DEA.

Import / Export of Natural Gas (including LNG)

There are no restrictions on cross-border sales or deliveries of natural gas as long as the general requirements in the Natural Gas Supply Act and the Executive Order (No. 1090 of 6th December 2000) are met.

The upstream transportation of natural gas in Denmark is regulated by the Danish Natural Gas Supply Act (latest edition Act no. 1331 of 25 November 2013) and the Executive Order no. 1090 of 6 December 2000 regarding access to upstream pipelines. The Executive Order states that any interested party is entitled to access the upstream network system against payment. The upstream pipeline system from the natural gas fields in the North Sea to the processing plant in Nybro, Jutland, is owned and operated by DONG; however ownership and the role of operator of the upstream natural gas pipeline system will be transferred to Energinet.dk prior to DONG’s listing as a public company no later than 2018.

Oil

The upstream transportation of oil in Denmark is regulated by the Pipeline Act (Act No. 277 of 25 March 2014). According to section 1 in the Pipeline Act, DONG Oil Pipe A/S (DONG) owns and operates the Danish upstream oil transportation system. The oil is transported from the North Sea platforms to the refinery facilities in Fredericia. Under reference to section 2 of the Pipeline Act, all oil producers in the Danish part of the North Sea are obliged to use and make payment for DONG’s pipeline system. Ownership and the role of operator of the upstream oil and condensate pipeline will be transferred to Energinet.dk prior to DONG’s listing as a public company no later than 2018.

The establishment and operation of a pipeline and the associated infrastructure must be approved by the DEA in accordance with section 17 of the Subsoil Act and an environmental impact assessment (EIA) must also be carried out. In relation to the associated infrastructure onshore, it will be necessary to obtain permissions from the involved municipalities, such as zoning and building permits, in addition to the foregoing permits.

6.3 In general, how does an entity obtain the necessary land (or other) rights to construct oil and natural gas transportation pipelines or associated infrastructure? Do Government authorities have any powers of compulsory acquisition to facilitate land access?

A permit for the establishment and operation of a pipeline must be obtained according to section 17 of the Subsoil Act. The responsible authority is the DEA. In addition, environmental impact assessments must be made according to the Zoning Act and relevant permits must be obtained from the municipalities. Under the Subsoil Act, government authorities have the powers of compulsory acquisition to facilitate land access.

6.4 How is access to oil and natural gas transportation pipelines and associated infrastructure organised?

Please see answer below in question 6.6.

6.5 To what degree are oil and natural gas transportation pipelines integrated or interconnected, and how is co-operation between different transportation systems established and regulated?

Please see answer below in question 6.6.

6.6 Outline any third-party access regime/rights in respect of oil and natural gas transportation and associated infrastructure. For example, can the regulator or a new customer wishing to transport oil or natural gas compel or require the operator/owner of an oil or natural gas transportation pipeline or associated infrastructure to grant capacity or expand its facilities in order to accommodate the new customer? If so, how are the costs (including costs of interconnection, capacity reservation or facility expansions) allocated?

Natural Gas

Access to the upstream pipeline network is regulated by Executive Order (No. 1090 of 6 December 2000). An application can be refused in accordance with section 3, subsection 2 on the grounds listed in subsection 5 (1-3) of the Executive Order. The refusal grounds are if the technical specifications seem incompatible and cannot be solved without difficulty, to avoid difficulties in relation to a harmful impact on the already existing hydrocarbon production, or in order to respect already documented needs for the owner or operator of the pipelines.

Pricing shall be set forth in a non-discriminatory manner and must be reasonable. Third-party access is subject to review by the Danish Energy Regulatory Authority (DERA), which settles disputes under the Executive Order.

Rules are likely to change once ownership and the role of operator of the upstream natural gas pipeline system is transferred to Energinet.dk within the next 12-18 months.

Oil

The access to the upstream pipeline network is regulated by the Pipeline Act, and any user shall pay DONG an amount to cover the capital costs relating to financing the establishment of the oil pipeline with appurtenant pumping and terminal facilities, and any branch pipelines. Further to be paid is an amount to cover other expenditures for the operation of the pipeline as calculated per unit of transported crude oil and condensate. The calculation of such amounts and the further rules for payment is listed in the Executive Order No. 43 of 20 January 2014.

In case of a disagreement between DONG and any third-party, regarding terms and conditions for the transportation, the matter will be settled by the DEA.

According to the law it is mandatory to use the oil pipeline. The further terms and conditions for use are regulated. To gain access to the oil pipelines requires commercial negotiations. Experience shows that the negotiations can be protracted, and prices and terms are not easily amended.

Further, the DEA has the authority, according to section 16 in the Subsoil Act, to grant third-party access to facilities other than pipelines and to set forth the terms and conditions for such access where agreement cannot be reached by the parties.

Rules are likely to change once ownership and the role of operator of the upstream oil and condensate pipeline is transferred to Energinet.dk within the next 12-18 months

6.7 Are parties free to agree the terms upon which oil or natural gas is to be transported or are the terms (including costs/tariffs which may be charged) regulated?

Natural Gas

The price, terms and conditions are to be negotiated and agreed on between the parties according to section 5 of the Executive Order. The agreement between the parties must afterwards be reported to the DERA, which supervises such agreements.

The Executive order is supplemented by (standard) Terms and Conditions for the Transportation of Gas in DONG Naturgas’ offshore Pipelines, which are to be entered into by DONG as the transporter and the individual gas producer.

Rules are likely to change once ownership and the role of operator of the upstream natural gas pipeline system is transferred to Energinet.dk within the next 12-18 months.

Oil

The rules for payment and calculation of payments are listed in Executive Order No. 43 of 20 January 2014. The agreement for transportation must be approved by the Minister for Climate, Energy and Building. Disagreement between the parties on terms and conditions for the agreement are to be settled by the Minister for Climate, Energy and Building (this power is delegated to the DEA).

Rules are likely to change once ownership and the role of operator of the upstream oil and condensate pipeline is transferred to Energinet.dk within the next 12-18 months.

Gas Transmission / Distribution

As described under question 1.1, the transmission system is operated by Energinet.dk while the distribution is divided into regions. The distribution is operated by DONG as the distributer of natural gas in South Jutland, South and West Zealand, by HMN Naturgas as the distributer for Central and North Jutland and the Capital Region, and by Naturgas Fyn as the distributer on Funen. In connection with DONG’s public listing by 2018 at the latest, the gas distribution networks in South Jutland and West Zealand will prior to the listing be transferred to Energinet.dk.

The requirements for a transmission company are listed in the Natural Gas Supply Act. A transmission company shall (i) ensure the quality of the natural gas supplied from the transmission system, (ii) ensure the supply of natural gas in Denmark, (iii) co-operate with other transmission companies in Denmark and across borders in order to efficiently exchange natural gas, (iv) prepare plans for the future needs for transmission capacity, (v) ensure sufficient quantities of natural gas, also in light of sustaining the quantities, and (vi) use methods that are transparent, non-discriminating, and market-based.

The requirements for a distribution company are also listed in the Natural Gas Supply Act. A distribution company shall (i) inform consumers in regards of the annual consumptions, savings on natural gas and calculate an annual consumption for the area covered by distribution from the company, and (ii) ensure realisation of documented energy savings.

7.2 What Governmental authorisations (including any applicable environmental authorisations) are required to operate a distribution network?

According to section 10 of the Natural Gas Supply Act it requires a licence to operate a distribution network in Denmark. The Minister for Climate, Energy and Building grants the licences. A licence will be valid for a minimum period of 20 years.

Licences can be granted to companies who fulfil the requirements under section 28 of the Act. These requirements are that the distributer must have the necessary technical expertise and economic background. The further requirements for access to the transmission system are listed in section 18 of the Natural Gas Supply Act.

7.3 How is access to the natural gas distribution network organised?

Please see the answer above under question 7.1.

7.4 Can the regulator require a distributor to grant capacity or expand its system in order to accommodate new customers?

Section 10a of the Natural Gas Supply Act states that a distributor shall maintain, rebuild, and expand the natural gas network to the extent necessary, and that the Minister of Climate, Energy, and Building can decide further details in relation to the maintenance on the distribution network. The supply of natural gas is considered a universal service. The companies supplying natural gas therefore have a public service obligation towards the consumers.

7.5 What fees are charged for accessing the distribution network, and are these fees regulated?

The fees and conditions for accessing the networks are listed in chapter 7 in the Natural Gas Supply Act. Section 36 a states that the fees are determined by the transmission and distribution companies using calculation methods approved by the DERA.

7.6 Are there any restrictions or limitations in relation to acquiring an interest in a gas utility, or the transfer of assets forming part of the distribution network (whether directly or indirectly)?

According to the Natural Gas Supply Act, a distribution network, its assets, and shares can only be transferred to the state. The state has an obligation to purchase a distribution network. The state’s obligations are carried out by Energinet.dk.

Natural Gas Trading

8.1 Outline broadly the ownership, organisational and regulatory framework in relation to natural gas trading. Please include details of current major initiatives or policies of the Government or regulator (if any) relating to natural gas trading.

According to section 7 (1) under the Natural Gas Supply Act, the consumer of natural gas can freely choose the supplier of natural gas and all companies with a licence for distribution shall according to section 7 (5) provide their services for the consumers in an objective, non-discriminative matter.

Gas Point Nordic is the Danish natural gas exchange. Further agreements on transfer of gas between shippers can be made through the Nord Pool Transfer Facility (NPTF). It is a requirement that customers are registered with Gas Point Nordic and Energinet.dk.

8.2 What range of natural gas commodities can be traded? For example, can only “bundled” products (i.e., the natural gas commodity and the distribution thereof) be traded?

If the requirements in the Natural Gas Supply Act and the Heating Supply Act are adhered to there are no restrictions on trade of natural gas commodities.

Liquefied Natural Gas

Except for the port of Hirtshals’ LNG terminal facilities that can facilitate ships bunkering LNG in Hirtshals, which was opened in July 2015, there are currently no LNG facilities in Denmark. The Natural Gas Supply Act contains the regulatory framework for the LNG facilities. It requires a licence to operate and distribute from a LNG facility in Denmark. Please see the answer above under question 7.2; the same rule set applies for LNG facilities.

9.2 What Governmental authorisations are required to construct and operate LNG facilities?

Please see the answers to questions 1.1, 2.1, and 7.2, as well as sections 3, 4 and 6, which are likely also to affect LNG activities.

9.3 Is there any regulation of the price or terms of service in the LNG sector?

Please see the answer to question 7.5. The same rule set applies for LNG facilities, although differences may occur due to the specifics of LNG.

The Natural Gas Supply Act contains the same rights for LNG companies as with respect to transmission and distribution companies of natural gas, although differences may occur due to the specifics of LNG.

Downstream Oil

10.1 Outline broadly the regulatory framework in relation to the downstream oil sector.

The downstream oil sector is regulated by multiple different regulatory frameworks in Denmark. There is regulation by the Environmental Protection Act, the Oil Emergency Act, the Petrol Distribution Act, the Competition Act, the Marketing Practices Consolidation Act and applicable tax law also regarding environmental tax. Further regulatory framework may apply according to the different stages in downstream oil.

In regard to the downstream oil sector, approximately 90% of the retail market in Denmark is represented by five companies: Statoil; Shell; Kuwait Petroleum; Uno-X; and OK.

The pipeline infrastructure

Denmark has two refineries: one in Kalundborg and one in Fredericia. The Kalundborg refinery, owned by Statoil, primarily runs Norwegian crude, but is flexible to run condensates and other crudes. All crude oil, including condensate, is supplied by ship. The Fredericia refinery is owned by Shell and processes mostly Danish North Sea crude oil supplied by pipeline from Danish offshore production.

The pipeline connecting the crude oil to the refinery in Fredericia is currently owned and operated by DONG. For the regulatory framework please see the answer above under question 10.1.

Competition

11.1 Which Governmental authority or authorities are responsible for the regulation of competition aspects, or anti-competitive practices, in the oil and natural gas sector?

The body in Denmark responsible for competition law analysis, monitoring and enforcement is the Danish Competition and Consumer Authority (DCCA), which endorses larger business mergers and instructs companies to amend or revoke agreements that limit competition.

11.2 To what criteria does the regulator have regard in determining whether conduct is anti-competitive?

As is the case under the EU competition rules, the Danish Competition Act is based on two prohibitions: (1) a prohibition against anti-competitive agreements, etc.; and (2) a prohibition against abuse of a dominant position. The two prohibitions have taken inspiration from Articles 101 and 102 of the EC Treaty, and they are enforced in accordance with the case law of the European Commission, the European Court of First Instance and the European Court of Justice.

11.3 What power or authority does the regulator have to preclude or take action in relation to anti-competitive practices?

The powers of the DCCA include prohibiting or amending agreements and making decisions. Fines for violating Danish competition law are imposed through the judicial system.

11.4 Does the regulator (or any other Government authority) have the power to approve/disapprove mergers or other changes in control over businesses in the oil and natural gas sector, or proposed acquisitions of development assets, transportation or associated infrastructure or distribution assets? If so, what criteria and procedures are applied? How long does it typically take to obtain a decision approving or disapproving the transaction?

Mergers or other changes of control over businesses are typically subject to the scrutiny from the Danish competition authorities under Danish competition law, which is strongly influenced by Danish membership of the European Union and EU competition law. These procedures can be lengthy. In addition, the DEA’s approval is required for the transfer of licence rights, etc. to third parties. The time for approval will be fully dependent on the circumstances of the case and the individual licence to be transferred.

Foreign Investment and International Obligations

12.1 Are there any special requirements or limitations on acquisitions of interests in the natural gas sector (whether development, transportation or associated infrastructure, distribution or other) by foreign companies?

Denmark is a member of the European Union and as such there are no special requirements or limitations on foreign companies beyond those obligations and limitations described above, found in the Natural Gas Supply Act or the Heating Supply Act.

12.2 To what extent is regulatory policy in respect of the oil and natural gas sector influenced or affected by international treaties or other multinational arrangements?

Denmark is a member of the European Union and, as such, all applicable EU regulations, directives and other measures will apply to Denmark. Denmark is also a signatory to a large number of international treaties and conventions applicable to the oil and gas sectors.

Dispute Resolution

13.1 Provide a brief overview of compulsory dispute resolution procedures (statutory or otherwise) applying to the oil and natural gas sector (if any), including procedures applying in the context of disputes between the applicable Government authority/regulator and: participants in relation to oil and natural gas development; transportation pipeline and associated infrastructure owners or users in relation to the transportation, processing or storage of natural gas; downstream oil infrastructure owners or users; and distribution network owners or users in relation to the distribution/transmission of natural gas.

Except for those listed below, there are no special dispute resolution procedures applicable in the oil and gas sectors in Denmark. Referral is made to the Danish rules on civil procedure and the Danish Arbitration Act.

For natural gas, disputes concerning access to the upstream natural gas pipelines including fees and prices will be referred to the DERA with recourse to the Danish Energy Complaints Board.

13.2 Is jurisdiction a signatory to, and has it duly ratified into domestic legislation: the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; and/or the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID”)?

Denmark is a signatory (1973) to, and has duly ratified into domestic legislation, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Denmark is a signatory (1965) to, and has duly ratified into domestic legislation, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID”).

13.3 Is there any special difficulty (whether as a matter of law or practice) in litigating, or seeking to enforce judgments or awards, against Government authorities or State organs (including any immunity)?

There is no special difficulty in litigating or seeking to enforce judgments or awards against Government authorities or State organs in Denmark.

13.4 Have there been instances in the oil and natural gas sector when foreign corporations have successfully obtained judgments or awards against Government authorities or State organs pursuant to litigation before domestic courts?

There have been several instances where foreign companies have been successful in litigation against the government authorities or state organs, for instance within taxation. Denmark has a fully independent judiciary and also a highly developed capacity to handle arbitration cases.

Updates

14.1 Please provide, in no more than 300 words, a summary of any new cases, trends and developments in Oil and Gas Regulation Law in jurisdiction.

The DEA announced the 7th licensing round on the 24 April 2014. The purpose of this 7th licensing round is to uphold the continuity of exploration activity. The round initially closed on 20 October 2014, where the DEA received 25 applications from 15 companies which is considered a success considering the relatively difficult prevailing market conditions. The award has been substantially delayed due to legislative changes to adhere to EU rules, and the DEA is now expected to issue new licences before the end of 2015.

Further, an act for changes in the Offshore Safety Act to implement the EU Offshore Safety Directive was adopted in December 2014.

Furthermore, changes to the Danish Subsoil Act, also to implement the EU Offshore Safety Directives (the rules on financial security a.o.) were adopted in April 2015.

Finally, the Danish government has initiated a strategy to identify the potential of Danish oil and gas, increased recovery and value creation, to be finalised with a report once investigation and deliberations have been completed. Reportedly, the report will be completed before the end of 2015.